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Tuesday, October 5, 2010

Understanding News- Stocks Gain 10/5

"Gain In Services Sector Lift Stocks; Dow Up 180"-AP  (1:24p EST)

NEW YORK (AP) -- Stocks rose Tuesday following news that activity expanded in the U.S. services sector last month.   World markets also rose after the central bank of Japan surprised investors by slashing interest rates to near zero.  The Institute for Supply Management reported that the U.S. services industry grew slightly faster in September as demand from customers improved. It was the ninth straight month of expansion in services, which have been growing at a slower pace in the U.S. relative to the much smaller manufacturing sector.

OK.  Now what did this news story really say-

1) Services sector, which is a much larger sector of our GDP than manufacturing, expanded though slightly and at a 'slower pace'.   Services sector jobs depend mostly on temporary, part-time and seasonal workers.  These people usually do not get benefits, job security or are counted on government unemployment statistics.

Calling this piece of news as a motivation for the markets to climb, is like celebrating because your fever went down from 102.9 F to 102.8 F.

2) The slashing of interest rates to near zero by Japan's Central bank means that Japan does not want its citizens saving-  they want their people spending.  Japan, like the US is also trying to devalue its currency to make its products more affordable for export abroad, but it means the people of Japan will have to pay more money for the same goods and services.  It also means the elderly will also have a more difficult time making ends meet on fixed income because of minimal interest on savings, thus forcing them to spend that money or invest their life savings in far riskier ventures.

This is exactly what is going on in the US with Bernanke and the Fed.

"Robert Pavlik, chief market strategist at Banyan Partners LLC in New York, cites another factor in today's upward swing: Even when stocks have fallen lately, the S&P 500 has managed to stay above 1,130, a key technical barrier that it had broken through on Sept. 20. He said that has given jittery investors confidence to buy.  "A lot of folks who have cash on the sidelines are being drawn into the market because they don't want to be left behind," Pavlik says. "I think there's potential to get to 1,200 by the end of the year." "

This paragraph is Very important... it demonstrates very clearly the herd mentality and PT Barnum-type hucksterism of  "A Sucker is born every minute".  I wrote earlier that the Fed pumped $6 billion into the markets last week and is prepared to put at least another $500 billion in November.  This was done intentionally to stir the pot in the markets and draw mom & pop investors who otherwise might continue sitting on the sidelines or  keep their money in far less risky ventures.   

Let me repeat the quote this parasite, Robert Pavlik says:   "A lot of folks who have cash on the sidelines are being drawn into the market because they don't want to be left behind.  I think there's potential to get to 1,200 by the end of the year."

Politics aside, the US Government-- Your government-- does not care about you, and does NOT want you to save money.  It is virtually bankrupt. It has spent close to 14 trillion dollars since 2008 to get the economy moving and it is sputtering.   It NEEDS you to invest- to put your precious hard earned money into risky ventures that will help the banks get out of the trillions in toxic debt from the mortgage backed securities, of  which they still have not fully disclosed the totals to the government. It is called 'steering- no different than directing cattle and sheep into pens.  

Without government interference, Dow would be at 6500. So you really have another 4000+ points in Fed Treasuries given free to the banks which they then put into the market.   This is public debt which you, your children and grandchildren will be responsible for paying back in taxes and cutbacks in programs and essential services.

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